Public debt expected to increase

The country’s total public debt is expected to increase by more than K4 billion from the projected 2017 Budget Estimate.

According to the Mid-Year Economic and Fiscal Outlook Report (MYEFO) released by Treasury on Monday, the public debt is expected to increase to K26 billion (K25,939.4 million) from the projected 2017 Budget estimate of K22 billion (K21,623.3 million).

This is an increase of K4.3 billion (K4,316.1 million).

Treasury attributes the potential increase to the growth in debt levels due to rolling over of Government Treasury Bills and marginal increase in Treasury Bills financing in 2017.

The MYEFO also states that debt to GDP ratio is projected to be 34.9 percent of GDP, which is 4.9 percentage points above the PNG Fiscal Responsibility legislated limit.

Treasury attributes this to escalated financing task in 2017 resulting in a large accumulation of Treasury Bills in the debt portfolio.

The immediate challenge, according to the Department, is for the Government to tighten the fiscal position during the second half of the year. The performance of borrowing, in particular external financing and all funding sources, will continue to be monitored and if necessary, adjustments will be made as and when required.

Meanwhile, the MYEFO’s Economic Outlook states that the domestic economy is expected to grow at 2.7 percent, which is slightly lower by 0.1 percentage point from the 2017 Budget estimate; employment has increased by 3.6 percent, mainly to increased mining activities; inflation expected to be 6.8 percent, a point higher from initial estimates.

The Fiscal Outlook for 2017, on the other hand, has weakened in the first half of the year, which expects to result in a net borrowing (deficit) of K2,820.4 million or 3.8 percent of GDP.

This is an increase of K944 million, compared to the initial net borrowing (deficit) of K1,876.5 million or 2.5 percent of GDP at the time of the 2017 Budget using new GDP.

Treasury says this primarily reflects a projected shortfall in tax and non-tax revenue receipts, particularly from Company Income Taxes, and dividends from State entities and projected increase in expenditure, particularly compensation of employees.

Total Revenue and Grants are also projected to be lower than the 2017 Budget estimates.

Total revenue is projected to be lower by K514 million. Total Expenditure and Net Lending are projected to be higher by K430.1 million than the 2017 Budget estimates.

Author: 
Cedric Patjole